I’ve been a fan of investment manager Dr. Steve Sjuggerud for years. Two of his recent articles encouraged me to finish an Excel spreadsheet that provides analysis for investing in rental real estate. In his February 10th article, “The Greatest Opportunity Ever is Just About to Pass You By”, Dr. Steve begins:
“You are foolish if you don’t do everything you can to take advantage of this.
It is probably the greatest opportunity for you for the next 10 years.
My friend, the time has come. It is time for you to buy a house…
No excuses. No delays. Just figure out how to make it work.
Already have a house? Go get another, and rent out the one you’re in.
The deals happening right now are ridiculous.
We all know the recent housing bubble was the greatest in American history. But what most people don’t understand is that houses are more undervalued right this second than they were overvalued during the bubble.
If you buy right now – I mean RIGHT NOW – you should still be able to get in at “below market” prices. You could get a property from a desperate seller, likely a bank. The better value you get up front, the higher your return percentage will be when things return to “normal.”
How much louder can I say this? This moment is the greatest opportunity ever to be an American homebuyer. It is the best moment in history. We may never see opportunity this great in our lifetimes.”
In his February 21st article, “This is the Moment I Live For as an Investor”, Dr. Steve continues:
“The basic story is that housing is an incredible value right this moment: With mortgage rates at record lows … and with a record “bust” in home prices, housing is more affordable than ever. PLUS, we’re at the “puke” point – where banks are giving up properties at any price, just to get rid of ’em. PLUS, the government is getting in on the act, trying to help.
Smart investors are taking advantage and scooping up the bargains.”
The biggest investment opportunity I’m analyzing right now is Rental Income Property. Perhaps you haven’t thought about investing in rental real estate since the bursting of the housing bubble, but now is the time. What we have is:
* motivated Sellers
* now as undervalued as it was overvalued during the recent bubble
* easy financing
* the government trying to help
* tax benefits, and
* positive monthly cash flow
Yes, investing in rental real estate income property could be the best investment of the next 10 years. Unlike during the bubble years, income property bought at the right price can now generate positive monthly cash flows for the investor. But real estate is a major investment of time and money. Investors should analyze cash flows and rates of return before buying a headache property. Instead of buying on hope, KNOW your rates of return, tax benefits, and cash flows BEFORE you buy. Calculate the optimal offer price. Analyze several loan options. See how different assumptions of vacancy rate, price appreciation, etc. effect the rate of return. Compare different rental investment opportunities.
But how exactly do you scoop up the rental real estate bargains?
That’s why I created a real estate excel spreadsheet to analyze rental property cash flow, rate of return, and profitability quickly and easily. Here’s a video tutorial of the Excel program:
You may purchase the Rental Income Property Analysis Excel Spreadsheet from the Research Offers page or via this button:
(PayPal is the payment processor, but it is not necessary to have a PayPal account; PayPal accepts major credit cards. Upon purchase you will be able to immediately download the spreadsheet to your computer. The spreadsheet runs in Microsoft Excel. Other than a ‘HealthyWealthyWiseProject’ header in the first row, the spreadsheet is unlocked so you can fully edit if you wish. If you have any questions before purchase feel free to contact me: firstname.lastname@example.org
Here are some screenshots of the spreadsheet. Basic rental property information is entered here.
Loan and tax information for the investment property is entered on the following sheet:
Rental income information is entered on the next sheet. The spreadsheet can account for multiple unit types such as apartment buildings, duplexes, etc. Rental income assumptions are also entered here. This sheet calculates Gross Scheduled Income, Gross Operating Income, and provides assumptions for rent increase and property price appreciation.
Annual real estate operating expenses are entered next. Common items such as property tax, insurance, and utilities; as well as rental items like Replacement Reserve, Advertising, and Property Management fees are accounted for.
Now the payoff – we analyze the first year of rental real estate investment returns. These include Cap Rate, Cash-on-Cash returns, Gross Rent Multiplier, and Return on Equity. Both Before- and After-tax cash flows are included as well as the tax benefit/loss.
Even better, a full 10 years of ownership returns are provided. Items such as Effective Gross Income (EGI), Gross Operating Income (GOI), Net Operating Income (NOI), Cash flows, and tax benefits:
More good stuff to know, including things like mortgage principal reduction, property appreciation, debt coverage ratio, as well as the estimated sale proceeds (after taxes and expenses):
Due to the weaknesses inherit in standard real estate return calculations such as Cap Rate (which doesn’t account for your initial investment) and ROE (which doesn’t account for Selling Costs), I added a true Internal Rate of Return calculation sheet which analyzes your cash flows and gives a more accurate picture of your return on investment in the property. This sheet also gives you an indication as how much of your profit relies on price appreciation versus rental income:
Mark Ford, editor of The Palm Beach Letter investment newsletter, adds the following:
Buying rental properties is a great opportunity for anyone who has some cash and is interested in turning it into a lucrative, income-producing business. And there are three reasons why now is the best time to buy.
First of all, the kinds of houses we are buying are cheap. The best properties to buy are single-family, three-bedroom, two-bath houses. There is always a big market for them, since they are perfect for young families. In “B” neighborhoods, you can buy them and have them spiffed up for about $90,000. That is less than the cost of building the house. In other words, you are buying a house at a discount and getting the property for free.
The second reason why now is the best time to invest is that mortgage rates are at all-time lows. You can get a 30-year, fixed-term mortgage for less than 4.5%. You can get a 15-year mortgage for less than 3.5%. CNN recently reported that mortgage rates are at 60-year lows.
Third, because so many people have gotten into financial trouble, the number of people renting homes today is greater than ever. Banks have tightened their lending policies (something they should have never loosened). Many people who earn good incomes can’t get mortgages. So the market is now flush with people looking to rent.
These three factors have created a terrific opportunity for prudent investors.
Today, if you took out a 4.5% mortgage on 80% of a $90,000 house, you’d be paying about $3,800 a year in mortgage payments. With taxes (at, say, $1,700) and expenses (say another $2,000), your total cost for owning the house would be about $7,500 a year. That translates into about $600 a month.
You could rent out a house like the one I’m describing for between $1,300 and $2,000 a month. Subtracting $600 (your monthly expenses) from, say, $1,500 (a conservative estimate of the monthly rent you’d be getting) will net you $900 a month. That’s a profit of $10,800 a year.
If your down payment for the house was $20,000 (20% of $90,000 is $18,000, plus about $2,000 to spruce the house up), your rate of return on that $20,000 is an amazing 54%.
But there is another major benefit to owning a rental property. With all the money the Federal Reserve has printed, the decline of the dollar and high inflation are all but inevitable in the years ahead. So the $600 a month you will be paying for interest and expenses toward your home will become easier to pay because your income, through inflation, will almost certainly go up.
In other words, the weakening of the dollar will make your debt less expensive in real terms.
And if that’s not incentive enough, consider this: as inflation increases, so will the market value of your home. It is quite possible that you could see your $90,000 house double in value in 10 years. And even if that doesn’t happen, it’s almost certain to double, triple, or quadruple by the time you pay off your mortgage. That translates into an extra $180,000 to $360,000 you can put toward retirement.
Look for the kinds of houses I’m buying: single-family, three-bedroom, two-bath homes under $100,000. You will find plenty of them, but they tend to go quickly.
Where do you find the income property bargains?
Try Homepath.com first. It is the Fannie Mae website. You can search for thousands of foreclosed homes and make your offer online. They have all types of homes available… from those needing light or moderate renovations to fixer-uppers. And the site has different ways to purchase… from auctions to public entity sales to pool sales to structured sales.
With this real estate rental software spreadsheet, you can take charge of your rental properties:
-analyze one unit (ie. single-family residential) or multi-unit apartment buildings with ease;
-Work with any-size income property;
-Include up to three loans;
-Obtain the rates of return effortlessly.
You don’t have to be a financial wizard, simply enter basic financial data into user-friendly forms, and the program will automatically calculate the formulas.
The spreadsheet is recommended for real estate investors who plan to buy and hold rental property. It provides a deep level of analysis with first year and 10-year holding period considerations.
The spreadsheet gives novice investors an easy and affordable way to know whether a real estate rental investment income property will be profitable before they put their money in.
Things You Can Do:
Cash flow projections
See how changes in rents or expenses affect your profitability
Discover your tax benefit or loss
Determine your return on equity
See if your investment goals are met
Calculate an optimal offer price
Compare several investing opportunities
Rates of Return:
True Return On Investment
Gross Rent Multiplier
Cash on Cash Returns
Return on Equity
Tax Liability (or loss)
and much more
This is a Microsoft Excel spreadsheet; it will work with Excel 2003, 2007, 2010 and 2013 (and any future Excel). Professional real estate spreadsheet programs can cost as much as $199.00.
2 Questions to ask Yourself Before You Buy:
- Is this product better than what you are currently using to analyze cash flows from rental property?
- If you purchase this spreadsheet, will you use it soon?
If the answer to above questions are YES, then I promise you will be satisfied with your new spreadsheet.
This Rental Income Property Analysis Excel Spreadsheet is available from the Research Offers page or via this button:
(PayPal is the payment processor, but it is not necessary to have a PayPal account; PayPal accepts major credit cards. Upon purchase you will be able to immediately download the spreadsheet to your computer. The spreadsheet runs in Microsoft Excel. Other than a ‘HealthyWealthyWiseProject’ header in the first row, the spreadsheet is unlocked so you can fully edit if you wish. If you have any questions before purchase feel free to contact me: email@example.com)
Note: If you are interested in investing in ‘House Flipping’ properties, see also the ‘Fix-N-Flip Rehab Analyzer for Excel‘.